Dec 12 - Slovenia reveals a 4.7 billion euro hole in its bank finances but doesn't need an outside bailout right now. But its shrinking economy is still feeding concerns that it may need one in the future. David Pollard reports.
The euro zone breathes a sigh of relief over Slovenia - for now. Banking stress tests have uncovered a 4.8 billion euro hole in the tiny nation's bank balance sheets. Central bank governor, Uros Jazbec, said the country's biggest three banks, all partially or wholly state run, need the most help. SOUNDBITE (Slovenian) SLOVENIAN CENTRAL BANK GOVERNOR, UROS JAZBEC, SAYING: "For NLB, NKBM and Abanka, recapitalisation of 3.012 billion euros is needed, effective immediately after the European Commission approves it. As for the other five banks, the central bank will give them until the end of June to ensure the capital to cover losses." Slovenia says it can recapitalise on its own - with a mix of state cash, losses imposed on bondholders and, if necessary, by tapping financial markets. There had been fears it would need a financial bailout. But the EU Commission dismissed the prospect. SOUNDBITE (English) CHANTAL HUGHES, SPOKESPERSON OF OLLI REHN, THE EU COMMISSIONER FOR ECONOMIC AND MONETARY AFFAIRS, READING OUT STATEMENT BY REHN, SAYING: "Today, it is clear that Slovenia can proceed with the repair of its financial sector without turning to her European partners for financial resistance." With Slovenia stuck in recession, it may be a quick fix only - and a stretch on resources. Tony Stringer of Fitch Ratings. SOUNDBITE (English) TONY STRINGER, MD, FITCH RATINGS, SAYING: ''It is a very significant number. To put it in context, it's the second largest percentage of GDP recap cost for any euro zone country behind Ireland, so it's a big amount for them to find.'' Once a rising star on Europe's ex-Communist fringe, Slovenia's economy has shrunk 11 per cent since 2008. In total, Slovenia has bad bank debts of nearly eight billion euros - around a fifth of GDP. It's trying to reform by raising the retirement age and cutting state wages. And planning a sale of assets including Telekom Slovenia and its number two bank, Nova KBM. But it's feared that a culture of so-called crony capitalism may hinder those efforts. And there are signs of division in the government over the sale of state-run businesses once considered untouchable.